M&A Market Update – Accounting firms

Since our last update the Mergers & Acquisitions market for Accountants around Australia, we have assisted a number of firms in both selling their practice or acquiring/merging with firms that are a natural fit with their existing culture.

At the outset, we would like to highlight that the market is buoyant, primarily led by the top 50 firms in the country. From a buy-side perspective, it’s rare to come across a medium to large firm that is not interested in expanding through acquisition. We define medium firms as those with a turnover in excess of close to $2m. When advising on a firm in a particular geographical area, our experience indicates that 80% of these firms would be interested when there is an opportunity to consolidate offices and resources.

As an aside, in recent times, we have had the pleasure of presenting to a number of sole practitioners both individually and as a group. If you are a sole practitioner (turning over less than say $800k), just bear in mind that from a qualitative standpoint, it’s unlikely that you will end up being ‘swallowed up’ by a large conglomerate where you might get lost in the outcome. This fear has been shared with us. The whole purpose of our approach is to ensure a strong level of comfort and trust gained through the process of meeting with potential Buyers, all of whom have been introduced after careful consideration of the Vendor’s situation.

Another observation we are seeing is that it’s quite common to receive correspondence, mainly emails, directly from accounting firms interested in acquiring practices. The risk with this approach is that both parties are entering into the discussion without any advice, or even competition, which can significantly change the outcome for both parties — often to the detriment of both accounting practices.  

Market Update – Thinking of Selling:

Accountants, well, at least most of them, are still time-poor.

Many Accountants considering selling their practice often cite the desire for a well-earned break as a primary motivation. This perspective is reinforced by an Accounting firm director, whose recent successful sale on February 1st echoes this sentiment.

A significant portion of Accountants seeking guidance on selling their practice are simply overworked. This situation frequently arises from staffing challenges, including difficulties in retaining talent and finding suitable replacements, resulting in an exhausting schedule of six days a week, twelve hours a day. We empathise with this struggle.

However, selling your practice doesn’t necessarily mean a swift exit within six months. Many Buyers hope you’ll stick around. They can efficiently manage your back-office resources, allowing you to focus on nurturing client relationships. And here’s an exciting prospect – they would appreciate you taking on new clients referred to you, a luxury many Accountants currently cannot afford.

We are seeing good ‘qualitative results’ for our clients. Both price & structure (refer to our eBook). Its due to demand & competition.

So, if that gets you thinking about ‘what if’ than call us to discuss.

Why Abacus?

  • We know the Accounting market; it’s our focus.
  • We know who’s who in the market.
  • We’ve advised numerous Accountants on mergers and sales in recent times.

Call us on 1300 121 013.

What about the other side? Thinking of expanding via acquisition?

You snooze; you lose. Be proactive.

In this competitive landscape, being proactive is key. Here’s what you need to consider:

  • Differentiate Yourself: Clearly articulate what sets your firm apart from others.
  • Engage All Relevant Stakeholders: Understand that discussions will likely involve both the Principals of the firm and those responsible for taking on the Vendor’s clients.
  • Open Communication: Be prepared to open the kimono. Expect vendors to have pre-conceptions about your practice.
  • Define Your Criteria: Establish precisely what you are looking for. Be particularly open geographically, as limiting yourself to a certain populous area increases competition. Remote resourcing is becoming a viable option.
  • Act Swiftly: Be ready to move quickly. In a dynamic market, time is of the essence.
  • Keep Us Informed: Inform us of your intentions. If you don’t, you might miss out when opportunities arise.

Expanding via acquisition demands strategic foresight and agility. Don’t miss the chance to seize opportunities in this competitive environment.

Will it get any easier?

There are firms that are looking for exit strategies and are at the forefront of changes in the industry. Many others, although moving towards digitalisation or investing in technology, are not. The problem lies in the fact that the workload for many Vendors isn’t getting any easier. They need another solution.

Without making grand assumptions, the larger firms with more capital are investing to create greater efficiencies. A lot of them are constantly on the lookout for better technology to make things even more efficient. We suspect many will embrace AI & robotics.

The result is that these firms have higher profit margins and know that, when they acquire a firm, they have the ability to increase the profitability of the acquired firm substantially once the firm is fully integrated. As a result, they are quite hungry for opportunities and can make offers surpassing those of many other firms.

So, no things won’t get easier.

But just remember it is about both quantitative & QUALITATIVE elements. If you can’t beat them at the numbers than beat them in the meetings.

You would be surprised how important the qualitative elements are.

So how does Abacus assist Practices?

This is what we do. We advise Accountants on mergers, acquisitions & the sale of their practice. We enjoy what we do & the feedback from our clients has been great.

Perhaps you should give us a call and learn a bit more on why now is a good time to look at your options.

Call us today on 1300 121 013

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